FEATURE - Monsanto prods South American nations on soy royalties

Date:28-Sep-04Country: ARGENTINAAuthor: Hilary Burke

But, despite a determined lobbying drive in Brazil, Argentina and Paraguay - the three top soybean exporters after the United States - these nations are unlikely to act quickly enough to satisfy the St. Louis-based agricultural giant, which would like reforms in place now, with the 2004/2005 planting season just beginning.

A bill that could legalize biotech crops in Brazil, one of the only remaining holdouts among major soy-producing countries, has stalled in Congress, delaying the day when Monsanto could counter widespread sales of its seeds on the black market.

In Argentina, the government won't finalize a royalties fund proposal until December - and then the bill will go to Congress. Meanwhile, in neighboring Paraguay, peasant protests may delay an accord on such fees in that country.

"This is definitely a region of particular interest to the company, because that is where soybean production is growing the fastest," said Todd Duvick, a food analyst at Banc of America Securities in Charlotte, North Carolina.

As soy production has surged in South America, particularly in Brazil, U.S. farmers paying stiff technology fees to Monsanto have decried the competitive advantage enjoyed by Latin American farmers using pirated Roundup Ready seeds, which will produce soy plants resistant to Monsanto's Roundup Ready herbicide.

"We believe it is reasonable that he who uses a technology and gains benefits by using it, also pays for it," Monsanto spokeswoman Lori Fisher told Reuters.

"Both Argentina and Brazil are important to worldwide agriculture and to any company who wishes to be compensated for the innovations they are bringing to agriculture," Fisher said.

For years farmers in Brazil and Paraguay - where genetically modified crops are illegal - have planted pirated Roundup Ready soy seeds.

Roundup Ready soy, engineered to withstand the effects of Monsanto's glyphosate-based herbicide, is popular with farmers because it makes soy cultivation cheaper and easier.

Roundup Ready soy is legal and is widely used in Argentina. Royalty fees are built into seed prices, but because soybean seeds are widely traded on the black market, Monsanto is demanding another mechanism.

The company stopped selling soy seeds in Argentina last year, saying it could not make back its investments. Now it threatens to collect royalties on soy shipments from Argentina to countries where Roundup Ready is patented, if they are found to carry unlicensed Monsanto product.

"This would be a worst-case scenario. It would give rise to conflicts and individual arrangements," said Alberto Rodriguez, director of Argentina's Center for Grain Exporters.

"The price for soy would no longer be transparent, because some buyers would have to factor in that cost, depending on the destination for their soy," he added.

Argentine farmers often sow saved seeds that they have culled from plants in the prior growing season, which is legal. But they also cull seeds to sell on the black market.

Monsanto's renewed push in Argentina comes after the government in February dropped an antidumping complaint against Chinese-made glyphosate herbicide.

"They're going after (royalties) a bit more aggressively now than perhaps they had in the past because they realize they may be losing some business on their chemical side," said Frank Mitsch, an analyst at Fulcrum Global Partners in New York.

SIX YEARS AND COUNTING

Brazil is one of the only remaining major agricultural exporters to ban the commercial use of genetically modified crops, although many of its soybean farmers have ignored the ban over the past six years and planted black-market biotech soybeans.

Brazil's president said on Thursday he may issue a decree granting amnesty to producers of genetically modified soybeans for a third growing season, while a biosafety bill that would make the crops legal makes its way through Congress.